Downtown Vancouver’s retail market continues to be the strongest in Canada, but among the sea of strength may be pockets of weakness and a risk from increased competition.

According to the latest figures from Statistics Canada, B.C. retail sales grew 5.7 per cent in September compared with the number last year, more than double the national average growth of 2.5 per cent.

Craig Patterson, editor-in-chief of industry publication Retail Insider, said Vancouver has consistently “punched above its weight class” in retail sales, partly due to the large influx of wealthy immigrants from the China in the past decade.

But Patterson cautioned that because the luxury retail sector that flourished is also reliant on high-end tourism, there are risks that could change things quickly.

“About 50 per cent of all luxury sales globally are to wealthy tourists,” Patterson said. “Right now, places like Vancouver, Toronto or London (England) are where people want to buy luxury goods because of things like the Brexit leading to the pound sterling and the Canadian dollar being bargains.

“There are a lot of cities worldwide that are also adding luxury stores, and if the Canadian dollar rises suddenly, all luxury retailers here could be vulnerable because we would no longer be an attractive market.”

The demand for retail space downtown varies by location, said Sherman Scott, associate vice-president of Colliers in Vancouver. Scott noted the addition of the Nordstrom department store has pulled interest eastward, with the western end of Robson Street — a traditional retail haven — taking the brunt of the impact.

“The 1100 block of Robson has definitely suffered,” he said. “Demand on the 1000 block is still very strong … but there’s downward pressure on the rental rate in (the western end of) the area, and in my opinion, they really need an anchor store or some new development to kickstart business.”

On Alberni Street — Vancouver’s new luxury row — some stores said the sales pace has moderated recently. But real estate officials noted demand for retail space on the strip remains at an all-time high.

“I will note that in discussions with almost every retailer we have spoken with in this sector, the sales in Vancouver are significantly higher than in Toronto and rents in Toronto still far exceed Alberni Street rents,” said Mario Negris, executive vice-president of CBRE’s Retail group in Vancouver.

Negris added that a real estate tax (like the one B.C. imposed on foreign buyers in August) typically does not affect retail sales.

“I have not seen any indication of a softening of the luxury market. The demand we are seeing from luxury tenants seeking to enter the Vancouver market is unwavering. In actuality, the deals we are working on — and the rents which will be achieved — will signal a continuing strength in that sector.”

Patterson said one aspect to Vancouver’s upscale retail to watch is whether Pacific Centre’s swing towards luxury brands with the addition of Nordstrom and other high-end retailers would draw foot traffic from Alberni as it did with the western blocks of Robson.

The Pacific Centre mall — which already has a Holt Renfrew store — recently Berluti menswear, where a pair of shoes regularly exceed $2,000. According to Cadillac Fairview, Pacific Centre’s foot traffic has increased by about 30 per cent since Nordstrom opened.

“Downtown Vancouver really has two luxury nodes now, and they compete,” Patterson said. “It’s challenging because Pacific Centre — which is not an area you traditionally find luxury brands — all of a sudden has a wider selection than it has ever had in its history. It’s been explosive.”

It does not mean Alberni has been standing still. Saint Laurent Paris, formerly Yves Saint Laurent, opened its first Canadian store on the “luxury row” between the Moncler and Prada stores this year, with several brands, including Rolex, confirmed to be arriving soon.

On Friday, Chinese jewelry giant LFX flew in almost 300 pieces of imperial jade — which had never left China before — to its Vancouver store to boost visibility and brand recognition beyond its traditional base of Chinese-Canadians.

Shi Li-hua, general manager of Shanghai LFX Co. Ltd., said his company chose Vancouver over New York for the showing particularly because their belief in the city as a premier upscale/luxury goods market in North America — despite the Vancouver location having opened only one year ago.

“We’ve been very happy with the Vancouver market so far,” Shi said, noting the city’s high Chinese population as a key factor for optimism. “Vancouver is an affluent city, and these items require a consumer base with the corresponding resources. There’s a sizable number of consumers that fit that profile in Vancouver.”

He acknowledged that upscale retail faces many challenges, but added that the market has been on a consistent upward trend since the economic crisis of 2008. That trend is no different here in B.C., he said, and the key is to connect with the consumers in a more emotional, personal way.

“We’re not just trying to sell and to boost visibility for ourselves,” Shi said. “We decided to put our regional operations here. Through whatever efforts we make in business, we are also hoping to do our part in contributing to the Canadian and B.C. economy, to grow together.”

Patterson said that the competition between the two luxury clusters doesn’t necessarily mean they cannot coexist, although he did note that West Hastings and Granville — previously a potential cluster for high-end retail — has faded due to the strong draws of Alberni Street and the Pacific Centre.

He pointed to Toronto, where multiple zones of luxury retail thrive.

“I think that, with one outdoor strip and a shopping-centre strip, you will have customers patronizing all of them — as long as consumers know the stores are there,” Patterson said. “For Alberni, as long as they keep adding luxury retailers — which it is — they’ll be fine. … If tourism remains strong and wealthy locals continue to shop, I think Vancouver will continue to be a very strong retail environment.”

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